Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


KiwiSaver default funds creating lazy investors

KiwiSaver default funds creating lazy investors, costing billions

Over 430,000 Kiwisavers, or just over 15% of KiwiSavers, continue to be invested in default KiwiSaver funds. This comes at an enormous cost to them. A recent study estimated that close to a billion dollars, and growing, is what default members have collectively foregone as a result of continuing to stay in default funds.

Binu Paul, co-founder of price comparison site, PocketWise ( says “The very fact that a new member can fall back on a ‘default’ position means that there is no incentive for the member to put the effort into making a considered choice at the time of signing up. This ‘easy way out’ creates lazy investors of KiwiSavers.”

With the review of the default KiwiSaver funds coming up in 2019, it is timely to reconsider why have a default KiwiSaver mechanism at all.

It’s easy enough to blame this on people’s apathy or to blame the default provider for not doing ‘enough’ to educate and encourage their members into a more considered choice of fund. But, perhaps the solution lies in the very structure of how KiwiSaver is organised to operate.

The concept of default funds was etched into the KiwiSaver regime when it launched in 2007, as a temporary parking space to enable investors enough time to make a considered choice of fund. The aim of default schemes is to provide stable returns for KiwiSaver members and build confidence in KiwiSaver. Default schemes have a conservative investment approach, meaning, typically lower but more stable returns over time.

As noble as that sentiment is, it may now be working against the interest of KiwiSavers. According to Paul, “It should be easier to force members to make appropriate decisions early on rather than leave it for later. It will be a harder sell down the line, especially with no instant gratification. ‘I’ll take a look at it later on’ hasn’t clearly worked for close to half a million Kiwis”.

Additionally, the concept of default schemes creates other anomalies.

In total there are about 20 retail KiwiSaver schemes of which only 9 have been designated ‘default’, at the 2014 review. Default schemes are chosen by a panel of evaluators assessing proposals submitted by providers and carrying out due diligence. The tenders are evaluated according to technical criteria (70 per cent) such as organisational capability, member education and investment capability; and 30 per cent of the evaluation on the providers’ pricing levels.

So what does that mean for the non-default providers? Should KiwiSavers feel less confident of them, assuming they had applied and didn’t make the cut?

Paul says, “Perhaps a more effective solution would be to require all providers to satisfy all requirements and if they are fit for purpose, to have at least one fund in their Scheme as a ‘default’ fund - rather than approving only some providers to offer default Schemes”.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Stats NZ: Largest Drop In Terms Of Trade In A Decade As Dairy Export Prices Sour

Lower export prices for dairy, meat, and logs in the September 2020 quarter led to the biggest drop in terms of trade since June 2009, Stats NZ said today. Export prices fell in the September 2020 quarter, down 8.3 percent from its highest ever ... More>>


Stats NZ: Election Boosts October Job Numbers

Job numbers were boosted by general election staff in October 2020, along with rises in the manufacturing, retail, and hospitality industries, Stats NZ said today. Filled jobs rose by 27,667 to 2.2 million in October 2020 compared with September, after ... More>>

Government: New Year Border Exception For Seasonal Workers In The Horticulture And Wine Industries

2000 additional RSE workers to enter New Zealand early next year employers must pay these workers at least $22.10 an hour employers will cover costs of managed isolation for the RSE workers RSE workers will be paid the equivalent of 30 hours work a week ... More>>


Media: Discovery, Inc. Completes Acquisition Of New Zealand’s Mediaworks TV Ltd

Auckland, New Zealand, December 1, 2020 - Discovery, Inc. (“Discovery”), the global leader in real-life entertainment, has completed its acquisition of New Zealand’s leading independent free-to-air commercial broadcaster, MediaWorks TV Ltd, now operating ... More>>

Department Of Conservation: Big Year Underway At Albatross Colony

Familiar faces are returning for the new season of Royal Cam, with a big breeding year underway for the toroa/northern royal albatross colony on Otago’s windswept Pukekura/Taiaroa Head. More than 120 albatrosses, a taonga species, have returned ... More>>

Real Estate: ASB Survey Reveals Majority Of Kiwis Expect House Prices To Keep Climbing


House price expectations are soaring as New Zealand’s housing market shifts up a gear. But stretched affordability is putting a dent in perceptions of whether it’s a good time to buy. While Kiwis reveal they do expect interest rates to fall further. ... More>>

Stats NZ: Births And Deaths: Year Ended September 2020

Births and deaths releases provide statistics on the number of births and deaths registered in New Zealand, and selected fertility and mortality rates. Key facts For the year ended September 2020: 57,753 live births and 32,670 deaths ... More>>